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Contentious Construction Legal Update: Enforcing Adjudication Awards

A recent decision in the TCC has established an additional ground to stay enforcement of an adjudicator’s award which, in certain circumstances, could make enforcing an adjudicator’s award more challenging.

Case Background

Fraser J in Gosvenor London Limited v Aygun Aluminium UK Limited identified a new ground for a party to rely on to stay enforcement of an adjudication award. This ground could bring into focus the risk of the enforcing party dissipating or disposing of the sum awarded and risk that it could not be repaid if the adjudication outcome was successfully challenged in the TCC.

Aygun entered into a secondary sub-contract with Gosvenor for the installation of cladding and other façade works. A dispute arose between the parties, which was referred to adjudication. Gosvenor won and were awarded circa £550,000. Aygun failed to pay the award and Gosvenor commenced enforcement proceedings in the TCC.

Aygun resisted Gosvenor’s summary judgment application alleging (for the first time) that a vast number of Gosvenor’s invoices were raised fraudulently. Aygun also made a separate application to stay enforcement of the adjudicator’s award pending final determination of the dispute. Whilst Fraser J rejected Aygun’s fraud defence, he accepted that allegations of improper conduct made against Gosvenor had not been rebutted and proceeded to consider whether such circumstances justified granting a stay.

A new ground for staying enforcement

The court has power to stay execution of an adjudication award under rule 83.7 of the Civil Procedure Rules if there are “special circumstances”. As confirmed over 13 years ago in Wimbledon v Vago, a court can stay enforcement if it can be shown that the recipient would not be in a financial position to repay the sum awarded at a later date if it was required to do so i.e. if the award was successfully challenged in the TCC. This was subject to two important provisos: (a) that the recipient company had not been placed in its problematic financial position by the claimant’s acts; and (b) that the recipient’s financial position was not substantially different to when it had entered into the contract.

Gosvenor’s conduct was called into question at the enforcement hearing with allegations of witness intimidation, fraudulent behaviour and the existence of unsatisfactory and contradictory statutory accounts. Particular evidence was also presented of a Gosvenor director claiming he would ‘wind the company up’ if it ever faced a claim from Aygun. Gosvenor failed to submit any evidence to contradict these very serious allegations which was a critical mistake.

Fraser J decided that these points (which had gone unchallenged) qualified as “special circumstances” for the purposes of CPR 83.7 and confirmed that the principles in Wimbledon v. Vego should be extended to include the following additional ground to allow a stay:

“If the evidence demonstrates that there is a real risk that any judgment would go unsatisfied by reason of the claimant organising its financial affairs with the purpose of dissipating or disposing of the adjudication sum so that it would not be available to be repaid”

Conclusions and implications

Fraser J pointed out that this was an exceptional case on its facts and that this new ground would only apply in limited circumstances. Nevertheless, parties seeking to stay the execution of an adjudication award may seek to use this decision as a basis for requesting more detailed information concerning the enforcing party’s financial position, and to highlight any adverse statements made by directors as to the company’s future trading intentions.

This Judgment also highlights the importance of filing detailed evidence to rebut arguments presented to a court in an effort to stay enforcement of an adjudicator’s award. If you fail to submit evidence it is likely the court will grant a stay and the time spent obtaining the adjudication award could be for nothing.